There’s one word in the English language which I believe we need to kill off, once and for all. It’s not ‘fleek’, or ‘LOL’, or even ‘FOMO’, although those are due for a guillotining, too. I’m talking about the word ‘best’, a term often used to puff up a vague statement or to stroke someone’s ego.
Here in the mortgage business, we’re actually not allowed to use it – we cannot say “This is the best home loan”. If we do, we get a stern talking to from the powers that be. That’s why you won’t find me using it to spruik my services, or any bank or lender’s mortgage rate.
You see, ‘best’ is an awfully misleading word. It implies a one-size-fits-all approach. Because when you think about it, what do statements like ‘The best pizza in town’ actually mean? It means that an individual with their own unique tastes decided that they really like proscuitto and rocket slapped together on a thin crust. Because of their own preferences, they’ve deemed it the most appropriate choice of all.
This kind of approach doesn’t work well for most things in life. You can’t judge something with one set of criteria, and then expect it to apply to everyone. After all, some people are strange and don’t like pizza.
What mortgages and pizzas have in common
Search on Zomato.com for the best pizza in town, and you’ll find legions of reviewers claiming to have found the Holy Grail of cheezy indulgence. You can rely on a general consensus to give you a good idea of where to go for dinner, but what if you’ve got allergies, and the most-reviewed place doesn’t have gluten-free bases? Obviously, you’d try somewhere more accommodating. Because not everywhere will offer what you want.
It’s the same with mortgage lenders and finding home loan rates. Like pizza shops with different toppings and bases, every mortgage lender has a different offering, and their own interpretation of the ‘best home loan rates’. You’ll find different products, services and rates that will suit different individuals, and their own unique financial needs and goals.
What to look for in a mortgage lender – it’s not just home loan interest rates!
When hunting around for the right mortgage for you, don’t get sucked in by gimmicks like low home loan interest rates. If you’re doing your research online, you might find a small lender who has an attractively low home loan interest rate. But wait! There’s more! On the flip side, they could have very restrictive policies that make it harder for you to get approved. Or maybe they have an agonisingly slow approval process, meaning you might just miss out on securing that dream home you’ve been eyeing off. Does that low home loan interest rate still look as shiny as it first did if it’s accompanied by a very lax approach customer care? I didn’t think so.
My top tips for finding the right mortgage for you
- Understand home loan interest rate types
Do you know the difference between a fixed interest rate and a variable interest rate? Do you know which interest rate type is right for your circumstances?
- Know the risks with a small deposit
If you’re only able to provide the bank with 15% of the property price, do you know what much Lender’s Mortgage Insurance (LMI) they’ll charge? Check out this post if you’re not sure how much of a deposit you’ll need for your first home.
- Suss out your lenders
Are they a smaller, younger lender? Or have they been around for donkey’s years? What’s their share price like? Can you find reviews online? Are their customers satisfied? Get a wide range of perspective by asking friends and neighbours. Smaller and online lenders can be bought out or struggle more than larger lenders in tough financial markets. If you choose a lender with a small track record, it’s easy for a new owner to buy them out and enforce a high interest rate.
Perhaps one of the most important factors to consider is how you’re treated as a potential customer. Do you feel cared for, and does prospective lender respond to your enquiries in a timely manner? Or are you just another number?
When people come to me looking for advice on getting a mortgage, I make the habit of letting them know how quickly they can expect to hear from me. I also let them know that I’m invested in a long-term business relationship with them. That’s why getting a mortgage broker takes a lot of the emotional and financial toll out of house hunting, because we do a lot of the hard work for you.
- Know what’s on the application form
Just as you’re looking for the right mortgage for you, lenders and banks are looking for the right customers. Do you know what questions your mortgage lender will ask you? How strict are their policies on annual income and existing debt?
Different banks and lenders have different criteria for successful applications, including but not limited to:
- Your annual income – how much are you earning every year?
- Your existing debts – will you able to afford mortgage repayments on top of your existing credit card bills?
- Your credit rating. Learn all about how to improve your credit rating here.
- Basis of employment – are you self-employed, or working full-time? How long have you been in your job for?
- Loan-to-value ratio – Some lenders will finance 97% of the cost of your new home, others stop at 80%.
- Understand the full cost
It can be very easy to think about your mortgage in terms of just another monthly expense. But to truly get an idea of the huge financial commitment you’re about to make, you’ll need to understand how much you’re going to be paying back over the lifetime of your loan. Canstar offers a simple tool for getting your head around the total amount of interest you’ll end up paying.
If you’re searching for the right mortgage for you and are entirely confused, you’re not alone by any stretch. That’s why it pays to have a mortgage broker on your side when buying a house – we can help you filter through the noise to find the right home loan for you, so that you can land that dream home faster.
Looking for a property in Sydney? We can help! Get in touch today.